• The Korean Journal of Financial Management
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• v.21 no.2
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• pp.27-63
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• 2004

Since the 1980s, many multinational corporations have been issuing stocks on foreign stock exchanges, not only to enhance their investor base and liquidity, but also to diversify risks. The phenomenon has also been intensified by the rapid financial globalization and securitization trends. The main purpose of this study is to look into the long-run performance of MNCs' cross-listings of stocks on foreign stock exchanges. We use the event study and cross-sectional regression methods. We obtained some interesting empirical results about the long-run effect of cross-listings. First before the listing data the effect of cross-listing is to increase the underlying stock Vice in the local market. It may be caused by expectation of lower risk and cost of capital. However, after the listing data the stock price has been declining, even if it is not significant. Second, we examine the difference in the long-run cross-listing effect, which may be caused by the listing direction. When listing is made from a less developed market to a more developed market, the effect is better than that in the reverse direction. Furthermore, the effect is worse, when the listing company's home country is the U.S. Third, there is a negative relation between CARs and underlying stock liquidity in the local market, So it implies that a firm, whose underlying stocks are very liquid in the local market should carefully value cross-listing based upon the cost and benefit analysis. Last, but not the least we find that the long-un cross-listing effect is better, when a listing firm's ROE is higher.